Iran tries to dodge oil sanctions

Iran has employed a number of methods aimed at circumventing sanctions on its oil industry

A complete European Union oil embargo on Iran over its nuclear programme comes into force on Sunday, but the Islamic Republic has already found some ways of circumventing the sanctions.

The Pacific islands of Tuvalu have some 11,000 inhabitants on a total of 26sq km (10 square miles) of land.

Few Iranians can find the tiny state on the map or have even heard of it, but out of a fleet of 39 Iranian oil tankers, 15 now fly the Tuvaluan flag.

In recent weeks, the National Iranian Tanker Company (NITC) has changed the names and flags of its fleet to try to avoid sanctions by the EU.

The EU will stop importing Iranian oil and ban insurance of vessels carrying the crude as of 1 July.

Tehran has played similar cat-and-mouse games with its commercial fleet previously.

Two years ago, when sanctions were imposed on the Islamic Republic of Iran Shipping Lines (IRISL), it re-registered the fleet under English names and with flags from Malta, Cyprus and Hong Kong to conceal their link to the blacklisted company.

Adopting flags of tax-haven nations which hold a seat in the International Maritime Organisation (IMO) is not an uncommon practice in the maritime world.

Satellite signals

No matter how many times a vessel changes its name and flag, it has a serial number given to it at registration that remains the same.

"While the IMO number is a unique reference to the identity of the vessel, it does not give any information more than a car's licence plate tells you who the owner or driver is," says Richard Hurley, a maritime data specialist at IHS Fairplay.

AIS Live, a ship-tracking tool by IHS Fairplay, also shows that Iranian tankers have in recent weeks been frequently turning their transponders off.

"The visibility of the fleet has dropped to around 70% of normal when compared to other similar tanker operators," adds Mr Hurley.

The IMO says it is mandatory for ships to keep their AIS transponder on except for when the security of the ship is at risk, and that all such incidents must be reported.

The Islamic Republic of Iran Shipping Lines company was the target of sanctions in 2010

Two of Iran's Tuvalu-flagged tankers are currently sailing in the Red Sea, heading towards Ain Sukhna on Egypt's Suez bank.

Oil vessels that are unable to cross the Suez Canal end up in this port, where a pipeline pumps their oil across Egypt to Alexandria.

Tankers on the Mediterranean side then pick up the crude and deliver it to European refineries.

Of 10 such refineries contacted by the BBC, all but one said they had their last Iranian cargo for June already delivered and did not expect to receive any more. One Italian refinery declined to comment.

Hypothetically, Iranian tankers could deliver to the Red Sea end of the Suez-Mediterranean pipeline and have other tankers pick up the crude on the Mediterranean side.

"Unless you have tasted Iranian crude on both sides, how would you know what is running through the pipeline?" said one oil trader, who wished to remain anonymous.

"The Egyptians of course hold the paperwork with that information. Question is how friendly they want to be to Iranians?"

Private exports

The EU oil embargo on Iran is actually in response to US legislation.

President Barack Obama signed into law a bill that puts sanctions on any entity that deals with Iran's central bank, the bank which settles Iran's oil money.

However, Iran's parliament has approved legislation that allows the private sector to sell the country's oil.

So the buyers will not pay into Iran's central bank but rather into the accounts of private-sector firms.

The bill gives permission for 20% of oil barrels to be exported by private companies instead of the national oil company, which has traditionally run the trade.

Given the extent of US sanctions against Iran's financial system, it would still be difficult for importers to transfer the payments to Iranian private exporters, but the move is widely seen as an attempt by Iran to bust the EU oil embargo.

While Iran has prior experience in busting sanctions, what Brussels and Washington hope for is to increase the cost of doing so to such a level that it becomes unsustainable for Tehran in the long-run.